Investors add to bullish U.S. bond bets after Fed meeting: JPM

Reuters Staff

3 Min Read

NEW YORK (Reuters) - Investors picked up their bullish bets on longer-dated U.S. Treasuries as Federal Reserve signaled it will remain on a gradual path in raising interest rates after its two-day policy meeting last week.

The share of “long” investors, who said they were holding more longer-dated Treasuries than their benchmarks, increased to 23 percent in the week of March 20 from 18 percent in the preceding week, J.P. Morgan showed in its latest Treasury client survey.

U.S. policymakers, as expected, increased key borrowing costs by a quarter percentage point to a range of 0.75 percent to 1.00 percent. Meanwhile, their outlook on growth and inflation was unchanged from December and showed no upward shift in the median view on three rate increases for 2017.

In the days prior to the March 14-15 policy meeting, the perceived hawkish rhetoric from a group of Fed officials including Chair Janet Yellen stoked speculation the U.S. central bank might consider raising rates four times this year.

U.S. yields have fallen in reaction to the Fed’s “dovish hike” last week as investors have moved money back into Treasuries, analysts said.

The benchmark 10-year Treasury’s yield US10YT=RR was 2.488 percent early Tuesday, down from 2.595 percent a week ago.

The share of “short” investors who said they were holding fewer longer-dated U.S. government securities than their portfolio benchmarks held at 23 percent for a second week.

Short investors equaled long investors on Monday, compared with net shorts of five percentage points last week.

The share of “neutral” investors, who said on Monday they were holding amounts of longer-dated Treasuries that match their benchmarks, fell to 54 percent from 59 percent the previous week, the survey showed.

Active clients that include market makers and hedge funds, who are seen to take on speculative bets in Treasuries, dialed back their bullish bets, the latest J.P. Morgan survey showed.

Thirty percent of them said they were long, unchanged from the prior week, while 20 percent said they were short, also unchanged on the week. The share of active neutrals remained at 50 percent.